H&R REIT has completed its previously announced acquisition of Primaris Retail REIT. As part of the transaction, a KingSett Capital-led consortium, which consists of certain KingSett Capital managed funds, Ontario Pension Board and RioCan REIT, acquired 17 Primaris properties pursuant to separate purchase agreements between Primaris and the consortium members. H&R then acquired Primaris and its remaining 27 properties.
Unitholders who elected cash for their Primaris units are entitled to $28 cash per Primaris unit for approximately 55 per cent of their Primaris units and 1.166 H&R stapled units per Primaris unit for the balance. All other former Primaris unitholders are entitled to 1.166 H&R stapled units for each Primaris unit. H&R delivered an aggregate of approximately 62.1 million stapled units pursuant to the transaction.
As a result of the transaction, H&R has acquired a $3.1 billion portfolio of 27 shopping centres, and also completed its previously announced sale of South Cambridge Centre in Cambridge, Ontario to RioCan for $35 million.
In connection with the transaction, holders of approximately 2.1 million exchangeable units of certain subsidiaries of Primaris now hold an equal number of exchangeable units of certain subsidiaries of H&R each of which are exchangeable for 1.166 H&R stapled units. Similarly, the 6.75 per cent (remaining aggregate principal amount outstanding $1,220,000), 6.30 per cent (remaining aggregate principal amount outstanding $7,726,000), and 5.40 per cent (remaining aggregate principal amount outstanding $74,963,000) convertible debentures issued by Primaris have been assumed by H&R and are now convertible into H&R stapled units at previously announced conversion ratios. H&R intends to promptly deliver to CIBC Mellon Trust Company, as trustee for its 6.75 per cent and 6.30 per cent convertible debentures, notice of its intent to redeem all such remaining outstanding debentures in accordance with their terms. It is anticipated that such redemption will be completed approximately 45 days following the delivery to the trustee of the notice of intention to redeem.
In addition to the convertible debentures which have been assumed by H&R, H&R has assumed an aggregate of $1.4 billion principal amount of mortgages on the acquired properties and has guaranteed the operating line of PRR Trust, now a subsidiary of H&R REIT, the outstanding principal of which is expected to be approximately $105 million after all closing costs have been paid.
The transaction was structured so former holders of Primaris units who are resident in Canada and who held their Primaris units as capital property received their H&R stapled units on a substantially tax-deferred rollover (the receipt of H&R Finance Trust units, the fair market value of which is 3.788 per cent of the aggregate fair market value of the total unit consideration received by Primaris unitholders, is taxable).
This transaction has led to the appointments of Patrick Sullivan as Chief Operating Officer of Primaris and Lesley Gibson as Executive Vice President, Finance of Primaris, which continues operations as a wholly-owned subsidiary of H&R.